Governor signs budget, cuts additional $489 million

With the signed budget bill in front of him Gov. Arnold Schwarzenegger answers a reporters question concerning the &amp;#036;85 billion revised state budget that he signed during ceremonies at the Capitol in Sacramento, Calif., Tuesday, July 28, 2009. (AP Photo/Rich Pedroncelli) RICH PEDRONCELLI, AP

SACRAMENTO California's latest fiscal crisis appeared to end Tuesday as Gov. Arnold Schwarzenegger used his authority to cut an additional $489 million from a budget package that already included deep cuts to social services and education.

"This has been a very tough budget, probably the toughest since I have been in office here in Sacramento and there were a lot of challenges simply because of the huge drop in revenues," Schwarzenegger said at a morning press conference where he signed legislation to fix the state's projected $26.3 billion deficit.

The governor said he had to use his line-item veto power to make additional cuts because the State Assembly did not approve two components of a budget proposal negotiated by the governor and four leaders of the Legislature. Last week, the Assembly passed most of the budget agreement, including a plan to borrow $2 billion in Prop. 1A funds from cities and counties, but rejected proposals to take $1 billion in local gas tax revenue and authorize offshore oil drilling near Santa Barbara County.

The absence of those two provisions subtracted about $1.1 billion from the overall budget package, reducing the state's reserve from $917 million to a deficit of $156 million. The Legislature can't approve a budget with a deficit, but technically what it approved was a budget revision, which made the deficit OK.

Through the vetoes and the use of some savings and a little borrowing, the governor was able to build a $500 million reserve - "skimpy" in the words of Finance Director Mike Genest, but better than nothing for a state that often has to respond to fires and other emergencies.

The cuts mainly centered on social services, which already were decimated by the budget package. The state's Healthy Families program, which provides health insurance to low income children, was slashed by an additional $50 million, a cut so large that administration officials said some kids would have to be kick out of the program.

More than $60 million was cut to county administration of Medi-Cal. AIDS prevention services lost $52 million, In-Home Supportive Services lost an additional $29 million.

The governor cut $79 million to counties to pay for social workers who investigate alleged cases of child abuse and work to reunify foster children with their families.

"More abused children will be left unprotected as a result of this cut, and more children will languish in long-term foster care," said Cathi Grams, president of the County Welfare Directors Association of California. "These cuts will result in fewer children being reunified with their families, traumatizing these children and, perversely, costing the state more for expensive foster care placements."

The governor's cuts also eliminated traditional clinic programs, such as Expanded Access to Primary Care. Expanded Access provides about 20 percent of the $700,000 budget for Lestonnac Free Clinic in Orange, which serves the uninsured. It was prepared to accept an influx of children from cuts to Healthy Families, but now Executive Director Ed Gerber says he can't afford to take any new patients.

"There's going to be nowhere for them to go," Gerber said. "This was the fall back for the safety net."

Also included was an additional $6 million in cuts to state parks, which administration officials said could result in as many as 100 state parks closing. Whatever happens, officials said state parks would remain open through the fall.

"If you've got a tent reservation for Labor Day, you're good to go," said Genest, the finance director.

"We will fight to restore every dollar of additional cuts to health and human services," Steinberg said, noting that while the Assembly rejected two components of the budget, "The Senate held the line and passed a budget revision package with a sufficient reserve that met the Governor's test."

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